EXECUTIVE SUMMARY
Antigua and Barbuda is a small island state located in the Eastern Caribbean facing significant and
unprecedented economic, financial and climate adaptation risks. These risks have been intensifying over the
past decade, and if left unaddressed will severely threaten the future growth prospects and social well-being of
the Island State in the years ahead. Unfortunately, even though the Government of Antigua and Barbuda (GoAB)
has been implementing comprehensive policy actions to address long-standing chronic economic imbalances
and growing vulnerabilities to climate change, challenges remain. In fact, the Island State is caught in a vicious
cycle that the GoAB seems unable to break – Antigua and Barbuda is highly indebted and with a weak fiscal
position, which constrains efforts to address climate vulnerabilities. In turn, extreme weather-related events
are further compounding debt problems and weakening fiscal accounts by adversely impacting tax bases and
economic drivers as well as creating reconstruction costs.
Since obtaining its independence, the economic wellbeing of Antigua and Barbuda has grown dependent on
tourism and tourism-related activities, which by nature are part of cyclical economic sectors prone to magnifying
loses and downward risks during financial downturns. Repeated and more frequent financial and climate related
shocks over the last few years have exacerbated massive declines in government revenues, with consequent
contractions in economic activity that have worsened fiscal and balance of payments positions, and created an
unsustainable build-up of public sector debt, characterised by arrears.
As a result, the GoAB, like most regional governments and Small Island Developing States (SIDS), finds itself ill
equipped to address the complex, yet significant, financial and climate vulnerabilities that need to be
confronted. Climate change is worsening environmental vulnerabilities that are already visible worldwide.
Antigua and Barbuda is one of the most vulnerable SIDS, due to factors such as geographic location, exposure
to invasive species, and lack of adaptive capacity. Further, the country has experienced negative climate change
impacts such as the increased-intensity of hurricanes, droughts and higher temperatures, coupled with legacy
economic issues like energy transition challenges, lack of financial resources, and worsening development
trends.
Effectively addressing existing, growing, and anticipated environmental challenges will require the deployment
of significant financial resources which demand higher fiscal capacity than the GoAB can currently allocate given
its unsustainable debt position. The situation is further exacerbated by the Island State’s high-income
classification, which restricts access to concessional funding from multilateral stakeholders. It is critical
therefore to formulate innovative solutions that may complement any potential future assistance from
international stakeholders. Furthermore, effectively addressing these vulnerabilities requires building global
consensus and alliances that facilitate collaborative approaches to deploy solutions.
The Alliance of Small Island States (“AOSIS”) is supporting efforts by the GoAB to maximize synergies between
potential options to re-direct fiscal resources and identify other sources of funding to address vulnerabilities as
part of an innovative regional pilot programme entitled “the Finance for Acting on Climate in the Eastern
Caribbean” (“FACE”). This strategic plan will support efforts to engage with the GoAB’s creditors to normalise
existing debt arrears while redirecting fiscal resources through the implementation of debt-for-climate
adaptation swaps to fund action to mitigate economic and climate related vulnerabilities.

The FACE programme also aims to leverage and institutionalise debt-for-climate swaps, using the GoAB strategy
as a pilot, to develop an innovative blueprint that can be replicated and scaled up for other SIDS in the Eastern
Caribbean, and if appropriate globally, to facilitate the implementation of similar strategies to help address
related economic and climate change adaptation and mitigation projects. FACE also aims to foment
opportunities for SIDS located in the Eastern Caribbean to escape the negative feedback cycle of high
indebtedness and related unsustainable debt service payments which are deterring economic activity and
creating ever growing challenges to develop solutions for worsening economic imbalances and the negative
impact of climate change.
Formulating and implementing a debt-for-climate adaptation swap strategy to mobilize funding for
environmental vulnerabilities while tackling an unsustainable public-sector debt burden will be an ambitious
and complex undertaking. The magnitude and scope of the environmental challenges and climate risks that the
GoAB needs to address implies that a debt-for-climate adaptation swap strategy alone cannot provide sufficient
financial resources to fully undertake a set of mitigation projects, much less help place the public sector’s debt
burden on a downward trajectory. The authorities will need to pursue a variety of additional strategies and
financing alternatives to pool resources and collaborative efforts to mitigate the diverse set of environmental
challenges and financial vulnerabilities. Antigua and Barbuda will require further effort to assess and develop
additional debt relief initiatives to restore debt sustainability over time.
The successful implementation of debt-for-climate adaptation swaps will depend on the government’s
continuous commitment to prioritize the country’s financial and environmental challenges, the identification of
climate adaptation and mitigation projects and engaging with a broad-based set of global stakeholders. In
Addition to the GoAB’s creditors, this will include multilateral institutions, trading partners, civil society, and
non-governmental organizations (“NGOs”), among others, to support efforts to implement the policy agenda
and achieve long-term financial and environmental objectives. The GoAB will need to strengthen and, if
required, customize institutional and legal frameworks as well as project implementation structures that can
effectively provide accountability, transparency, and reporting mechanisms to support debt-for-climate
adaptation swaps. These institutional arrangements may need to meet the specific requirements of different
creditors and/or stakeholders willing to provide funds or relief, including good governance to support the flow
of funds, efficient operations, and maximize environmental benefits from the implementation of project
activities.
This Roadmap has been developed to provide the GoAB with action-oriented guidance to assist in the
formulation of a strategy to engage with creditors, and other stakeholders as appropriate, to effectively
negotiate debt-for-climate swaps that facilitate the re-channeling of resources to implement mitigation projects
while helping normalize existing debt arrears. Negotiations for a debt swap, even in the best of circumstances,
can be protracted and complex. However, this Roadmap aims to provide an analytical context to anchor
negotiations and assist in the implementation of the debt swap strategies to achieve the GoAB’s financial,
climate and debt management objectives.
To achieve these goals, this Roadmap has been structured as follows:
1. The first section provides an overview of Antigua and Barbuda’s current macroeconomic context to help
frame the financial discussions for pursuing debt-for-climate adaptation swaps.
2. The second section provides a brief overview of the current environmental challenges that Antigua and
Barbuda is facing to help
2. The second section provides a brief overview of the current environmental challenges that Antigua and
Barbuda is facing to help prioritize the types of projects that may address climate vulnerabilities.
3. The third section provides an analysis of the GoAB public sector debt position and its payment capacity, to
help frame the benefits for normalizing debt arrears, fomenting medium-term debt sustainability and
rechanneling fiscal resources to address vulnerabilities through debt swap strategies.
4. The fourth and fifth sections outline the key issues for formulating debt conversion schemesin general, and
debt-for-climate adaptation swaps specifically, to provide a framework to facilitate their implementation.
These sections set out important considerations for institutional arrangements based on best practices,
including robust legal frameworks and project implementation structures, that could be established and
relied upon to provide accountability, transparency, and management, as well as monitoring and reporting
mechanisms.
5. The final section of the Roadmap outlines strategies to identify, engage and communicate with a wide range
of potential creditors and stakeholders. This section provides a framework to effectively negotiate the
implementation of a debt-for-climate adaption swap.
SECTION 1: MACROECONOMIC CONTEXT
OVERVIEW
Antigua and Barbuda is a small island in the Eastern Caribbean facing significant and complex economic, financial
and climate challenges. Although classified as high-income by the World Bank (WB), the economy is relatively
small and characterised by high levels of public sector debt including arrears on foreign currency-denominated
liabilities, mostly owed to official bilateral creditors. The growth in debt arrears have been compounded by
mixed results in government efforts to diversify economic activities as well as the severe impact of numerous
unforeseen shocks over the past decade. Furthermore, like many other SIDS in the region and throughout the
world, Antigua and Barbuda’s economy is highly vulnerable to the adverse effects of climate-related events,
placing the island’s social well-being and economic future at risk.
BACKGROUND
Since obtaining its independence, the economic wellbeing of Antigua and Barbuda has increasingly grown
dependent on tourism and tourism-related activities. As such, growth has been positively correlated to
economic activity in the United States and, to a lesser extent, that of the United Kingdom. These economic
activities have contributed on average to approximately two-thirds of gross domestic product (GDP), despite
policy efforts to diversify economic drivers through activities that complemented and leveraged the tourism
sector, including for instance, the development of offshore financial services and online gaming activities.
To stimulate economic activity and foster regional stability, eight island nation-states located in the Eastern
Caribbean region, including Antigua and Barbuda, formally institutionalised the Eastern Caribbean Currency
Union (ECCU) in 1981. A common currency was introduced in 1976, managed by an independent central bank,
the Eastern Caribbean Central Bank (ECCB), which has successfully maintained a peg to the US dollar at an
exchange rate of 2.7. The currency arrangement has effectively fomented macroeconomic stability among the
ECCU member states by managing inflationary pressures and expectations as well as helping create confidence
through a credible policy framework.
Until the early 1990s, regional growth rates averaged over eight (8) per cent, which led to substantial
improvements in the standards of living of the country. However, since then average growth rates have slowed
as economic diversification has proved a challenge, not only for Antigua and Barbuda, but also for the entire
Caribbean region.
While coordinated monetary policy has positively contributed to political and social stability,
it has nonetheless come with added costs, as ECCU member island states have relied on fiscal policy as their
main shock absorber to stimulate growth and stabilise social safety nets in times of crises. This reliance on fiscal
policy has also contributed to the build-up of large public sector debt burdens, which now threaten the stability
of the entire region. As a result, most regional governments have been ill equipped to deal with the economic
and social consequences of numerous financial shocks, starting with the financial crisis of 2008, hurricane Irma
and Maria in 2017, the Covid-19 pandemic in 2019, and most recently the Russian invasion of Ukraine which has
seen global inflation soaring.
THE IMPACT OF UNFORESEEN SHOCKS
In 1995 hurricane Luis devastated the island’s economy, leading to a 1.4 per cent economic contraction in real
terms, but activity recovered quickly. Nonetheless, while growth proved anaemic, economic activity stabilised
until 2003, when the US imposed restrictions on internet-based gaming which again negatively affected growth.
Economic activity failed to recover to the average low levels of performance attained before the imposition of
the United States’ restriction. However, in 2007 Antigua and Barbuda co-hosted the Cricket World Cup, for
which related infrastructural development contributed to the almost 14 per cent growth rate recorded in 2006.
In 2008, the global financial crisis followed with a devastating effect on Antigua and Barbuda’s economy and
living standards, leading to the country’s worst recession in its history, with repercussions still being felt today.
During the period from 2009 through 2011, the country’s real GDP lost almost 23 per cent of its value as the
global slowdown severely affected economic activity through contraction on tourist arrivals, lower inflows from
foreign direct investment (FDI) and remittances, as well as a dramatic collapse in fiscal revenue. In 2009, for
instance, fiscal revenues declined by 22 per cent, or close to 5 per cent of GDP, while expenditures increased by
24 per cent reflecting the need to adjust social spending and account for higher-than-projected fiscal outlays.
Consequently, the primary deficit reached 11.5 per cent of GDP, pushing the overall fiscal budget to a deficit of
20 per cent of GDP.
From 2012 through 2014 economic activity slowly begun to recover, with GDP expanding by 2.3 per cent in real
terms during the period. Tourism and related activities experienced a boost worldwide. During the period, the
GoAB undertook a series of far reaching fiscal and structural reforms, financially supported by a three-year
International Monetary Fund (IMF) Programme and Policy-Based-Loans (PBLs) provided by the Caribbean
Development Bank (CDB), aimed at creating a more dynamic and flexible economic environment, as well as
fostering sustainable long-term economic activity. Nevertheless, in 2017 and 2018, two large-impact hurricanes
(Irma and Maria) dealt another blow to economic activity, living standards and social conditions.
RECENT ECONOMIC DEVELOPMENTS
In recent years, the economy has been further adversely affected by additional global macroeconomic shocks
and the effects of extreme climate-related events. The economy’s reliance on tourism to generate foreign
currency fiscal revenues leaves it acutely vulnerable to shifts in global macroeconomic conditions. The global
policy responses to contain the impact of the Covid-19 pandemic all but halted economic activity in important
drivers of growth, particularly tourism, as global travel came to a halt. Estimates by the IMF and the Ministry of
Finance, Corporate Governance and Public Private Partnerships (MOF) indicate that the economy contracted
again by over 20 per cent in 2020 compared with just under 7 per cent for the Latin America and Caribbean
region (LAC).


The economy saw a similar contraction after the 2008 global financial crisis, with growth declining
by 12 per cent alone in 2009 and remaining in recession for several years afterwards. In the last decade the
economy has only been on a consistent growth path from 2014 to 2019, averaging just 4.5 per cent, during
which growth was driven mostly by the tourism sector. However, this period also coincided with a large
accumulation of public debt and the country experiencing devastating hurricanes.
In the aftermath of the 2017 hurricanes, public finances were affected and Antigua and Barbuda continues to
face structural challenges from the high costs of reconstruction. Economic activity declined drastically, the
revenue base decreased as tax exemptions were introduced to help with reconstruction, and government
spending increased to rebuild public infrastructure. The five-year period to 2019 was again also characterised
by massive fiscal deficits, revenue pressures and the accumulation of arrears driven by widespread exemptions
(estimated at 45 per cent of potential fiscal revenues) and lower tax compliance which eroded the revenue
base.1 The MOF and the IMF estimate that the combined value of damaged or destroyed assets and disruptions
in the production of goods was equivalent to 9 per cent of GDP.2
Antigua and Barbuda is only now slowly beginning to recover from the adverse macroeconomic impact of the
Covid-19 pandemic as economic activity has rebounded in the tourism sector. However, the fiscal pressures
resulting from the pandemic increased public debt and gross financing needs (GFNs), leading to the
accumulation of further arrears. Critically, public sector debt is now assessed as unsustainable by the IMF.
As outlined in the country’s Medium-Term Fiscal Strategy (MTFS) the Government aims to, inter alia, formulate
a set of strategies to restore debt sustainability and eventually clear the external and domestic arrears by
focusing on domestic revenue mobilization and targeted spending. However, despite the economic rebound
following the pandemic, significant near- and medium-term risks remain. The economic consequences from
Russia’s invasion of Ukraine, including slower growth and significant inflationary pressures, are likely to impact
the recovery and future efforts to foster viable and inclusive economic activity.
CLIMATE AND MACROECONOMIC STABILITY
The adverse effects of rapidly increasing and more extreme climate-related events will continue to pose a
systemic risk to macroeconomic and financial stability in Antigua and Barbuda. The estimated damage caused
by hurricanes from 2008 to 2017 amounted to over US$200 million, with hurricanes Irma and Maria in 2017
damaging or destroying 95 per cent3 of the housing stock on the island of Barbuda and leading to the evacuation
of over 1,600 people.4 These costs are expected to increase in the coming years.
In addition to the cost of the damages themselves, the GoAB has had to divert scarce fiscal resources towards
mitigating measures to reduce financial exposure and other vulnerabilities such as the annual insurance
premium to the Caribbean Catastrophe Risk Insurance Facility (CCRIF). Unfortunately, given Antigua and
Barbuda’s World Bank income classification, the island state has not qualify for any of the post Covid-19 debt
service relief initiatives sponsored by the group of twenty G-20 and the main multilateral lenders such as the
IMF and the WB. This has had the effect of compounding challenges in other areas where funding is required,
the further build-up in debt arrears, as well as a further increase in the public sector’s debt stock.
The impact of the various financial crises and climate related events of the past decade have weighted heavily
on living standards on the island state.
Income per capita has declined significantly since 2008, while Important
social programmes and social safety net initiatives funded through employment contributions and other fiscal
resources have been eliminated, cut and/or significantly impaired. With little fiscal room to manoeuvre and an
unsustainable debt position, there is growing concern that the country’s standards of living will continue to
deteriorate while vulnerabilities to climate change worsen over the medium-term without immediate assistance
from the international community.
PUBLIC SECTOR DEBT POSITION
Antigua and Barbuda’s public sector debt position was assessed as unsustainable by the IMF in the latest Article
IV report, which was completed in 2021, on the basis of the results of a comprehensive Debt Sustainability
Analysis (DSA). The elevated public sector’s current debt stock, combined with the existing level of arrears
(defined as the accumulated backlog of principal and/or contractual interest that have not been made and
continue to build up over time), further restricts the Government’s precarious fiscal position, its ability to service
debt, and curbs capital raising capacity, desperately needed to finance critically important infrastructure
initiatives and climate-related projects to address existing vulnerabilities. Furthermore, Antigua and Barbuda’s
high-income classification by the WB limits the Government’s ability to raise concessional multilateral financing,
thereby increasing the cost of borrowing, that can be destined for development and social spending.
PUBLIC SECTOR DEBT STOCK OVERVIEW
At the end of February 2022, the stock of public sector debt totalled approximately XCD3.62 billion (or roughly
US$1.34 billion), equivalent to just over 90 per cent of GDP. Arrears accumulated on the public sector’s debt
stock currently total XCD576 million (or US$214 million), which means that approximately 16 per cent of the
stock of debt needs to be normalised. It is important to note that normalisation of arrears, in the absence of
real debt relief initiatives, would significantly raise debt service requirements as a percentage of revenues.
Nonetheless, despite the repeated impact of devastating unforeseen financial shocks over the last decade, the
Covid-19 pandemic, and extreme climate related events, the GoAB has managed to contain the level of debt and
the further accumulation of arrears. This compares to the situation in 2009, when following the global financial
crisis, total public sector debt was well over 103 per cent of GDP and approximately half of the total public sector
debt stock was in arrears. To put the situation in perspective, the stock of arrears was equivalent to 190 per
cent of Government revenues at that time. While the situation remains dire for Antigua and Barbuda, the debt
position could have been much worse.
The breakdown between liabilities denominated in Eastern Caribbean dollars and foreign currencies (mostly US
dollar) is roughly the same, or approximately XCD 1.8 billion, respectively. However, most of the arrears, or
approximately XCD496 million (14 per cent of the total debt stock) has been accumulated on foreign currency
liabilities. These arrears are largely owed to official bilateral creditors, which creates challenges for normalising
debt relations in the absence of an IMF sponsored Programme. This, in addition to the fact that external debt
accounts for almost 50 per cent of the total debt stock, a level well above what the IMF considers prudent for
countries with external financing problems and prone to unforeseen shocks, exposes Antigua and Barbuda to
significant portfolio risks that urgently need to be addressed.

PUBLIC SECTOR DEBT DYNAMICS
Over the past three decades, economic growth in Antigua and Barbuda has been driven by tourism activities,
supported by investments and physical infrastructure developments for the sector, which in turn led to a rapid
rise in economic standards and improved living conditions. Unfortunately, much of Antigua and Barbuda’s
economic progress was financed through the accumulation of significant public debt to finance critical social
and economic infrastructure. However, Antigua and Barbuda has been hit by successive global and regional
shocks, which have severely impacted the GoAB’s ability to service existing liabilities, leading to the
accumulation of arrears as the Authorities have been required to prioritise fiscal spending to ensure climate
resilience as well as provide vital social support domestically, among other key areas.
Between 1998 and 2009, debt-to-GDP averaged 117 percent. The ratio peaked at 147 per cent in 2004, but
efforts to implement reforms allowed the key indebtedness ratio to fall to 88% by June 2008. A newly elected
administration in 2004 introduced a series of measures upon taking office to gradually increase revenues, pay
down arrears and limit new borrowing. These efforts were reversed because of the 2008 Global Financial Crisis,
which again pushed the ratio to 107% of GDP at the end of 2009. The implementation of new fiscal adjustment
measures under an IMF Programme and with the support of the CDB, once again allowed the debt ratio to
decrease to 103% by the end of June 2010.
In 2010, as a consequence of the 2008 Global Financial Crisis, the GoAB attempted to normalise arrears and debt
relations with both Paris Club and non-Paris Club external creditors. In November of 2010, the GoAB signed an
agreement with Paris Club creditors to restructure outstanding debts, in support of a comprehensive debt
strategy that aimed to place the public sector debt on a downward sustainable path. This agreement
rescheduled outstanding arrears and certain maturities over 12 years with a 5-year grace period.
Unfortunately, growth and fiscal revenues failed to recover as expected under the IMF Programme and the GoAB
was unable to maintain payments as agreed in the bilateral rescheduling agreements. On the debt side, the
further economic impact of hurricanes Irma and Maria in 2017 have been significant, due to reduced economic
activity and tax exemptions associated with reconstruction to rebuild public infrastructure and provide support
to those affected. There have also been significant financial implications of the ongoing drought and other
climate related events, which put significant additional pressure on the GoAB’s finances and debt servicing
capacity.
The Covid-19 pandemic sharply reversed the gains achieved in 2010 with respect to the public sector’s debt
position, and once again the GoAB experienced a further accumulation of external arrears, as tourism revenues
contracted steeply, affecting hotels and restaurants, wholesale and retail, transportation, storage and
communication sectors as well as the necessary additional expenditures required to provide essential social
assistance and support the fragile banking system as the economic impact of the pandemic has affected
businesses and the population as a whole.
Fiscal consolidation efforts are currently underway as detailed in the Government’s comprehensive MediumTerm Fiscal Strategy (MTFS). Among the key policy initiatives under consideration are efforts to clear
outstanding arrears and gradually bring public debt on a downward trajectory, with a target debt-to-GDP ratio
of 70 per cent by 2030. Despite all these measures, however, Antigua and Barbuda remains in arrears to all official bilateral creditors.

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